Sunday, 29 January 2023

Excited and a little worried for 2023 | How I am investing going forward

It’s been a confusing period for me as the markets fall and my net worth dropped like nobody’s business but on certain days, we see some form of recovery. I started investing in 2017 and it’s been an exciting 5 years of investing and experiencing many first and especially so now with high inflation, high interest rates and unknown future. Most importantly, companies trying to cut costs and operating expenses which in turn has resulted in layoffs in certain industries.

I am going to be having some rough goals for 2023 but it’s really not going to be a hard rule to follow it. Also, won’t be putting out numbers as I think I should keep it for myself to see but of course, I will be recording and tracking my quarterly updates as always. For 2023, I am hoping to making investing more of a hands-off approach for me. Automating everything and just checking back once in a few months will be good for 2023 and keeping up with the macro-environment. So for a hands-off approach for me will involve an index ETF and REITs ETF so just those 2 will be the main investment vehicle for me 2023, the rest would most likely be minute amounts.

Inflation and why it is just the beginning

It is my first time seeing inflation in levels like these although historically, it has happened before as I have been living in times when globalisation has happened and trade was encouraged among many nations as it brought many benefits to all parties. Many things were affordable as free trade was promoted. Previously, China has and still currently is the factory of the world and with cheap labour as well as mass production, almost everything and anything can be made in huge numbers and fast.

Recently however, you would have notice that many companies are trying to divert out of China as they realised how reliance on one country for supplies can turn sour if relations turn bad. This is seen particularly obvious when Russia and Ukraine are at war and with EU and USA providing aid to Ukraine, natural gas and oil to EU has been badly hit. Especially so to Germany as they import a huge proportion of natural gas from Russia.

Right now, Germany is scrambling to find other sources to supply them with it. We can also see USA implementing the CHIPS act, we all now know the importance of semiconductors as 2020 and 2021 saw how the supply chains affect semiconductors and their impact to our everyday items like refridgerator, television, microwave and many more. This made many items more expensive as chips were not able to be produced or delivered in time and lesser supply means higher prices. Even Taiwan has become so prized due to having TSMC (world's largest dedicated independent (pure-play) semiconductor foundry).

The CHIP act block Chinese firms that are trying to develop advanced chips from accessing non-Chinese factories that rely on U.S. technology to manufacture their products, and deprive those firms of expertise by barring American citizens and companies from assisting them. - The Atlantic

Getting out or staying put in China

It’s not easy getting fully out of China production as the manpower and machinery make it still profitable to make items there. But many companies are partly moving out certain segments to diversify the production site in case of anything. Apple is moving certain production out of China to Vietnam and India. Relations is also one of the factors why companies are diversifying out of China although production will not be completely out of China, Southeast Asia is benefiting from this.

China is still a very much attractive place as they have been the factory of the world for some time and no one can match up to them yet. They now are able to harness tech together with production to produce very good results. Even though the pandemic measures have been extreme but they have recently opened up and with the volume of transaction done in China due to the sheer size of the population, it’s not a market to be ignored.

No more globalisation and free trade = high prices?

If China isn’t making the items anymore, then whoever is making it might not be able to match the same prices considering they would need to train workers and wages are generally higher. Vietnam and India does seem to gain more in this sense as factories slowly move in there. The world is a lot more exciting as we saw how China opening up and when some countries set some extra measures for China citizens, China said that they would retaliate which we can already see.

How I am investing in 2023

Index ETFs is the way for me now. We do see crypto recovering slightly though not yet back to ATH which I think will take some time. But we are still early in the year so anything can still happen. I think we are seeing some kind of recovery currently and I have to admit that I have itchy fingers to buy more individual stocks mainly Tesla but I know my portfolio allocation is a little out of place. I will still continue to make the bulk of my funds to purchase index ETFs till a certain proportion before I consider adding any individual shares.

Entering another new year just makes me feel how fast time passes, I am sure 2023 will pass in the blink of an eye but excited for what’s to come and I do have an overseas trip planned for the early part of 2023 so looking forward to that!

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